Wall Street bonuses and staff levels are expected to rise this year as trading and dealmaking activity pick up, according to a closely watched report released on Friday by a compensation consulting firm.

The firm, headed by longtime industry pay consultant Alan Johnson, cited "signs of economic recovery in the United States and positive market momentum" in its report, but also noted that new regulations and a slowdown in Europe may weigh on bank profits and employee compensation.

Johnson Associates predicts that banks and other Wall Street firms will grow headcount by 5 percent to 10 percent this year. Cost-cutting initiatives in 2011 and 2012 helped support bank profits, as trading and dealmaking revenues were soft.

The firm predicts that advisory bankers will receive bonus increases of 5 percent to 15 percent, while underwriting bankers will receive bonus increases of 10 percent to 20 percent. The firm expects employees of equities and fixed-income trading divisions to receive bonus increases of 5 percent to 15 percent. Bonuses in other areas including prime brokerage, asset management, hedge funds and private equity are expected to rise in similar ranges.

Commercial banking and retail banking were the only areas Johnson Associates expects to have flat to 5 percent bonus increases.

Wall Street bonuses and staff levels are expected to rise this year as trading and dealmaking activity pick up, according to a closely watched report released on Friday by a compensation consulting firm.